Commercial Loans Blog

What do you think is the single most important item in a commercial loan package? Is it the Pro Forma Operating Statement? After all, whether or not the borrower will qualify for a commercial mortgage loan ultimately depends on the cash flow of the property, right?

Or is the most important document in a commercial loan package the personal financial statement on the borrower? After all, commercial banks are the only commercial lenders actively funding deals right now at reasonable terms. If the borrower is not making lots of money and if the borrower does not have a lot of cash in the bank, a commercial bank probably won't do the deal.

No. The most important document or item in any commercial loan package is the picture! If you don't have at least one attractive color photograph of the property, don't bother submitting the deal. It is the picture that sells the lender on taking the time to underwrite the deal.

That's why it drives me crazy when brokers and borrowers submit commercial loans to us without a beautiful color picture of the property.

Not any picture will do either. Many times we have received commercial loan packages with grainy, out-of-focus pictures taken on cloudy days. Yuck! C'mon, guys, this is Lesson One of commercial real estate finance.

Don't submit your commercial deal until you have at least one attractive color picture of the property, taken on a sunny day with lots of blue sky overhead. Blue sky sells.

Remember, a commercial loan underwriter is not going to underwrite a commercial loan until you sell him on the attractiveness and desirability of the property. You could have a filthy rich borrower and a great cash flow; but if the commercial lender never even bothers to open your commercial loan package, what have you accomplished?

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Blackburne & Sons may be the only hard money farm land lender in the country. We love making hard money loans on farm land.

Why farm land? Farm land is the only class of real estate that has appreciated since the start of the Great Recession. Blackburne & Sons is so bullish on farm land that we actually put together eleven little syndicates to buy farms here in Northern Indiana. Those syndicates did well. We have already sold seven of them for a handsome profit.

The typical loan is 12.9% to 13.9%, 3 to 5 points, 25 years amortized, due in two years, with no prepayment penalty. We will lend between 40% and 65% of value, depending on the borrower's income and credit. We might go as high as 70% LTV on a purchase, if the buyer was putting down 30%.

Mortgage brokers should prominently emphasize the availability of hard money farm loans in their flyers and newsletters because they will have very little competition. This is a fast and easy way to earn a large commission.

If you found this article to be instructive, I strongly encourage you to subscribe to our blog via email. To get a copy of each new training blog article as it comes out, without having to remember to come back, please fill in your email address in the space provided on the right.

Lastly, if you're a buddy or a former student of mine, would you please do me the great kindness of hitting the Like button, the Google+1 button, and the Linked-In Share button above. Thanks so much. :-)